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I’m a senior executive at a major national retail bank. With all the negative publicity about cross-selling in banks last year, we sense the climate is shifting. Should we shift, too? We’ve always tried promoting multiple products to the same group of customers because we think it leads to greater loyalty and lower selling costs. Why shouldn’t a powerful brand try to capture every part of a customer’s business, including their insurance, home equity loans, wealth management, and checking accounts? What’s wrong with cross-selling as a strategy, and where would you go from here?
—Sleepless on Wall Street
Funny you should ask. I recently received an investor letter from the CEO of a multibillion-dollar financial technology company that’s building out a larger product line for its current customers. In his letter, the CEO writes, “We have increased the number of cross-buy opportunities with our current customer base.” He adds, “Thanks to the bad press, I can no longer say ‘cross-sell’!”
So, yes, the climate has shifted. Almost overnight, “cross-selling” seems to have gone from a ubiquitous practice imbued with positive connotations throughout the business world — not just in banking — to a politically incorrect word that’s redolent of corporate misbehavior. And that could be a wonderful thing if it causes companies such as your own to rethink their approach.
As you know, cross-selling is a concerted effort to push more products to a company’s current customers, and it’s often accompanied by a goal to average some number of products sold per customer. That seems perfectly sensible, except it’s putting the cart before the horse: the company before customers, and a goal ahead of strategy. As a result, cross-selling is not really a strategy at all, and when conflated with one, trouble will follow sooner or later.
A customer buys multiple products (or services) from a company for only two possible reasons. One, because each product provides the best benefits for the price. The benefits can be tangible (such as superior functionality, quality, and reliability) or intangible (trustworthiness, status, and community). For example, even though they are more expensive, I purchase TaylorMade’s golf balls and driver because both are better for my game than alternative brands and, frankly, because Tiger Woods recently switched to them — not because there’s a salesperson from TaylorMade or one of its retail partners trying to cross-sell these products to me.
In contrast, I hold a checking account with my particular bank because I can access it anywhere in the world, but I get wealth management services from a different company because its value proposition is much better. Only a more compelling value proposition from my bank would make me switch, and no amount of cross-selling will change that.
The second reason a customer buys multiple products from the same company is because the combination itself yields some kind of a benefit, economic or otherwise. For example, as an iPhone user, I subscribe to Apple Music because of the convenience it affords me in buying, storing, sharing, and listening to music. I also have a savings account at my bank in large part because the bank waives fees for my checking account when my savings balance meets a certain threshold. In other words, I buy multiple products from Apple for the benefit of convenience and I hold more than one account at my bank for the benefit of cost savings, not because someone is cross-selling me.
Make cross-selling a result of good strategy, not a substitute for it.
When you set goals and incentives for cross-selling, you take a path that distracts you from achieving the very outcome you want. Instead, you should stay focused on creating value propositions for each of your products, or for some combination of them, that will make customers want to buy multiple products from your company. That comes from putting your customer and strategy first, not from pushing ever-harder to foist more products on your customers. The CEO of that financial technology company got his language right: You want your customers “cross-buying” because they find it in their interest to do so. The result is a triple win — greater customer loyalty, lower selling costs, and, yes, more products per customer.
So, where do you go from here? Make cross-selling a result of good strategy, not a substitute for it. For sure, you should monitor how many products your customers are buying from you, and compare yourself to others. But if you don’t like what you see, worry about customer pull, not sales push. Look externally, not internally. First, question the value proposition for each of your products from the customer’s perspective; then consider whether your sales and marketing is doing justice to them. Before trying sweeter carrots or harsher sticks to stoke more cross-sell, work on exactly how your customers benefit from cross-buying your products. Offering better value propositions — with sharper, more acutely targeted sales and marketing — is a more durable path to earning a greater share of your customers’ business.